Sunday, September 23, 2007

MLM Compensation Plans - The Good, The Bad, and The Ugly Part 4

Now that we've covered the basic strong and weak points of the most common mlm compensation plans in Parts 1, 2 and 3 of the series, it's time to take a good look at how some top mlm companies have attempted to provide a solution to the compensation plan dilemma.

As I mentioned in Part 3, there is a new breed of network marketing companies that are using what's known as a Hybrid compensation plan model. Hybrid plans, as the name suggests, combine the best components of some or all of the common plans and create a new plan design from them. A Hybrid can be a dramatic improvement or twist on a common old-style plan, or it can be a combination of features from different mlm compensation plans that create a new plan design altogether. Whatever the case, the goal of a Hybrid compensation plan should be the increase in fair compensation to the entire distributor base, while leaving enough working capital for the company to run profitably. There are 2 hybrid compensation plans that have recently emerged as excellent examples of how to achieve these goals.

The first of these is a variation and improvement of the Unilevel compensation plan. It is basically a 2 tier compensation plan (with a roll-up feature for the pros) that places the bulk of the compensation percentage on the first 2 levels of the plan. There are quite a few network marketing companies that are beginning to either switch to this style plan or launch with it from the start. This is a very good thing for potential distributors, and I'll explain why.

First, by placing a large payout and unlimited sponsorship positions on the first level, new reps have a BIG incentive to sponsor consistently -- negating the laziness factor of the Matrix. This is great for the company for increasing business volume, and it's great for the rep because sponsoring new reps into the company is the name of the game if one wants to build a solid recurring income from their business. Secondly, the new rep has a big reason to help their new reps get started because the 2nd tier percentage -- the commission on the folks their new rep sponsors -- is quite large as well. This helps build morale and also a strong, solid group built on relationships. In addition, it is common in these types of plans to have a roll-up commission feature based on personal sponsoring, which is attractive to the professionals as well.

The second of the Hybrid mlm compensation plans we'll touch on is what could be called a Matching Matrix. In this plan, as with all Matrix plans, the distributor is allowed a specific number of sponsorship positions on the first level. The best of the top mlm companies using this style plan set the first level limit at 2. By doing this, the plan leverages the advantage of the Binary plan, since the rep only has to concentrate on building two legs. However, unlike a standard Binary, there is commission percentage paid on the entire group volume no matter which leg the volume is generated in -- a nice improvement.

Also, this style plan has a matching bonus feature, preferably 100%. This means every time a new rep comes into the business, the sponsor gets a 100% matching bonus on that distributor's business volume. This is a HUGE incentive to sponsor consistently and support new reps, for obvious reasons. Also, by structuring the plan this way, it is just like having an unlimited number of front-line sponsorship positions, even though there are really only 2 allowed. Better yet, new reps after the first 2 would be placed downline, supporting their business-building efforts. There are so many reasons this type of Hybrid plan has emerged as a great combination of the best plan features.

I hope this 4-part series has helped you understand the basic strengths and weaknesses of the common Big 4 compensation plans used by network marketing companies for years, as well as the benefits of the newer Hybrid plans that have recently emerged in the industry as well.

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